refinance

Dealing with a mortgage is always tricky when financing it. However, when you understand the indicators, you can always restructure it to fit your needs. Here is a guide on the signs that will tell you when to refinance it if you are looking for the best deals in the financial market:

When you are planning to buy another investment property

Buying a new investment property can sometimes help you grow your money value in the long run. However, this might be challenging when you have no idea on what to do during the time as you do pay the mortgage of your home. You may seek refinancing to aid you solve your problems.

When you are having huge debts

When you are at a point of defaulting on your personal debt, it is advisable to seek refinancing to assist you consolidate your debts as a way of easing your finances.

When there exists better rates within the market

The market rates often change with time. You must know the existing market rates when you need excellent deals. You can always refinance your loan when you find better rates within the market. With better rates, you will be certain of making some savings in terms of amount of money that you will repay as interests. Those who have tried it have been satisfied with the better market rates thus helping them save money whenever they are looking for excellent deals.

When you want to renovate your home

Think it is time to replace leaky faucets, repaint your home, or make major changes. This means you will need a strong refinancing procedure that may be a burden to your life. When you are in such a situation, you can take an opportunity to understand when to refinance to get out of it faster.

When rates in the market are about to rise higher

Though interest rates may be recording lows, you should always know that they would always fluctuate depending on the dynamics of the market. As a borrower, you can always anticipate a rise in interest rate through switching your loan to a fixed rate if your currently do have a variable rate. Through this, you will enjoy lower interest rate for a much longer at the same time enabling you make some savings depending on the amount of money that you would spend.

When there are changes in your financial situations

Having a rough time when repaying your mortgage can be difficult when you do not know what to do. However, through this process, you can always know what to do in your financial situation such as birth of a child or unemployment before seeking refinancing to switch to that loan you can easily afford.

There are two kinds of homebuyers: those for whom the sales price is the main consideration, and those who are mostly concerned with what it will cost them per month. If you’ve already bought a house, there isn’t anything you can do about the sales price. But there may be ways to lower what you shell out monthly.

Want to lower your mortgage payment? Here are a few ways to do it.

Get Rid Of Your Private Mortgage Insurance (PMI)

“PMI is the lender’s (bank’s) protection in the event that you default on your primary mortgage and no longer make payments and the home ends up going into foreclosure,” said Investopedia. “If the borrower is unable to put down 20 percent or more, or does not have the required funds to do so, then lenders will typically look at the loan as a riskier investment for their balance sheet and will require a PMI payment from the borrower.”

That means you end up paying a premium above and beyond your principal, interest, and homeowner’s insurance—currently about 1.35 percent. On a $200,000 loan, we’re talking about $2,350 a year. Remove your PMI, and that’s $195 a month in your pocket.

If house prices have been rising in your area, you’ve been in your home for at least two years, and you think your equity in your home has increased, talk to your lender.

Lower Your PMI

If you can’t yet get rid of your PMI, you may be able to lower it.

In January 2015, the government announced lower PMI rates for buyers taking out Federal Housing Administration (FHA) loans.

“This change is expected to save more than two million FHA homeowners about $900 a year and allow about 250,000 consumers to buy their first homes in the next three years, according to a news release from the U.S. Department of Housing and Urban Development,” said Credit.com. “Hundreds of dollars in savings makes a big difference in the finances for first-time homebuyers who couldn’t afford to make a 20 percent down payment.”

New homebuyers can take advantage of the lowered PMI; existing homeowners who want to lower their PMI will need to refinance.

Refinancing

Lowering your PMI is far from the only advantage of refinancing. Taking advantage of low rates means you could save substantial dollars on your mortgage payment.

“Depending on loan size, a rate reduction of as little as a half point can save some real money,” said Fox Business.

If you are currently paying on a 15-year mortgage, switching to a 30-year loan can save you hundreds of dollars monthly. Check out this comparison calculator to see your particular scenario.

If you’re in an area that is declining and can’t refinance by traditional means, check out a HARP refinance. “The Home Affordable Refinance Program (HARP) through the U.S government may be the answer to your financial woes.

According to the HARP fact sheet, if you don’t qualify for a conventional refinance, a program through HARP may help lower your mortgage payments through refinancing to a lower rate or a more stable mortgage product,” they said

Check out the HARP website for qualification information.

Buy Down Your Rate

If you’re just buying a home, your lender may have already talked to you about buying down your rate. If you can swing it, a little more money upfront for a lower interest rate can save you money. Sometimes, your lender might also be able to help you buy down you rate.

“You can typically purchase one discount point for one percent of the cost of your mortgage, with most lenders limiting you to the purchase of three points,” according to U.S. Mortgage Calculator. “Each point will reduce your rate by 0.125 to 0.25 percent, for the life of your loan. That can mean some serious savings and a modest reduction in your monthly payment.”

Monthly principal and interest on a $300,000 mortgage at a 4.27 percent conventional rate is $1479.34. Buying down the rate by one point to 4.02 percent lowers the payment to and the payment to $1435.70.

Get a Tenant

Have an extra room, preferably one in a private location with its own entry? Take on a roommate or a border and collect some rent.

According to US News, renting is an effective way to solve a cash flow problem. “When people can’t afford to buy homes, they rent. More demand means you can get more for your spare room,” they said.